The third floor of Columbia Business School’s Uris Hall was buzzing the night of Tuesday, November 12. Instead of the usual young aspiring business students, though, the lobby was packed with more than 250 finance professionals waiting to file into Room 301 to listen to some potentially moneymaking ideas.
The crowd had trekked to the Morningside Heights neighborhood of Manhattan for InvestPitch, a stock-picking event co-hosted by Institutional Investor and SumZero, an online community for more than 9,000 hedge fund, mutual fund and private equity fund investment professionals. Each of the 19 participating emerging hedge fund managers was given three minutes to make the case for an investment — think of it as an extended elevator pitch.
Attendees were given scorecards to evaluate the performance of each presenter through four criteria: validity of the thesis, strength of the argument, feasibility of the trade and originality. After handing in their evaluations at the end of the night, audience members, which included investors of all kinds, were treated to a download of each presenter’s full paper concerning his or her equity pitch that night. This give-and-ye-shall-receive concept is the backbone of SumZero’s model.
“We created SumZero with the intent of connecting buy-side professionals, giving them a venue in which they can share their own ideas,” says CEO and co-founder Divya Narendra. “As the site has grown, we’ve layered incentives into the community to make it more compelling to share your own proprietary research.”
SumZero’s origins trace back to 2007, when Narendra was working as an associate for Jeffrey Larson’s Boston-based hedge fund Sowood Capital Management. Seeing an opportunity to connect buy-siders (as opposed to sell-siders, who cannot invest in the securities they cover, buy-siders are likely to be personally invested), Narendra launched the web site with the ideas of reciprocity and reputation central to success. Members, who are thoroughly vetted before being allowed access to the site, are required to post at least one piece of research for six months access to others’. Just as Carl Icahn made his Apple position quite public through his Twitter account, a buy-sider confident in his own idea would want to publicize it to draw in others, notes Narendra.
In this vein, we have whittled down the list of the 19 managers who presented at Columbia Business School to three finalists, based on the attendees’ voting. We invite you to view and vote for your personal favorite, considering the four listed factors. The voting will begin December 5 and continue through January 6, after which we will tabulate the winner of InvestPitch. A more comprehensive look at the winner’s strategy will follow online and in the February print issue of Institutional Investor.
Here are the three InvestPitch finalists, along with a brief overview of their investment ideas:
Daniel Carroll, Litmus Capital Management
Long IDT Corp. (IDT:New York Stock Exchange)
Founded in 2004, New York–based Litmus Capital had more than $200 million in assets under management before relaunching with Daniel Carroll as sole portfolio manager. He pitched Newark, New Jersey–based telecom company IDT Corp. One of the firm’s key products is Boss Revolution, a discount digital calling card system that Carroll, 46, says is geared toward immigrant communities. Carroll finds IDT attractive because he views the company as a good value investment, with three potential high-growth businesses — a mobile app called Zedge; a new payments business; and Fabrix, a cloud software aimed toward data storage and streaming — that could double one’s money down the road.
Greg Fujii, Amelon Capital Management
Short Neste Oil (NES1V:Helsinki Stock Exchange)
As managing member, Greg Fujii is responsible for all investment strategies at Chicago-based Amelon Capital Management. Fujii’s pick of Finnish refining and marketing company Neste Oil represents the lone short position among the three finalists. The 34-year-old Fujii believes Neste Oil’s shares are overvalued by 80 percent to 100 percent. He takes issue with the company’s renewable fuels business, which he believes largely outperformed in 2013 because of a loophole that allowed the company to exploit price inefficiencies with U.S. biodiesel Renewable Identification Number (RIN) credits, which Fujii says the Environmental Protection Agency has since remedied. Fujii expects Neste Oil’s share price to come down when 2014 operating income falls far short of 2013’s, with the refining and gas station ownership sides of the business unable to make up for the biodiesel shortcomings.
Daniel Lawrence, Elmrox Investment Group
Long InterXion Holding (INXN:NYSE)
Managing partner and founder of New York–based Elmrox, 32-year-old Daniel Lawrence previously won the grand prize at the 2013 Value Investing Challenge for his recommendation to buy chemical maker Ashland. Here Lawrence chose to pitch InterXion, an Amsterdam-based provider of carrier-neutral co-location data center services. Lawrence feels the European company’s competitive advantage is underappreciated by the market and is undervalued when long-term growth potential is considered.